Wednesday, 18 May 2016

New Zealand’s
more than half-century of muddle on housing policy is finally catching up with
us. Since the 1950s, successive governments have viewed housing through a very basic
lens: maintaining a supply of public housing stock to meet the needs of low income
families, and, until the 1990s, using government institutions like the old Post
Office and the Housing Corporation (and its predecessor the State Advances
Corporation) to finance low interest loans for young couples to buy their first
homes.

The two were a
simple policy that ensured a steady stock of basic style largely conformist
homes would be available in the burgeoning suburbs. They all looked pretty much
the same, and were designed to cater for the standard New Zealand family of the
time. However, as the dynamics of what National in the 1950s and 1960s used to
call our property-owning democracy began to change in terms of family
structure, urban development, and lifestyle demands, the political parties were
slow to adapt. For National, housing was still about the pursuit of the
property-owning democracy, even if rising inflation in the 1970s and the boom
in property prices since meant the dream was able to be shared by fewer and
fewer people. For its part, Labour has remained trapped in the time warp of
Michael Joseph Savage and colleagues shifting furniture into the first state
house in 1937. State housing is still a badge of honour for Labour politicians
– I recall feeling distinctly uncomfortable when I was a Labour MP that I could
not join the boast of having been brought up in a state house!

So both main
parties are hostage to their history when it comes to modern housing policy, as
the current debate painfully shows. Spurious arguments between the two about
whether people with foreign sounding names are to blame, or whether government
agencies are up to the mark in meeting the needs of the genuinely homeless are
just fiddling at the margins, and continually miss the fundamental point. Their
past gives little confidence in their ability to develop the solutions we so
desperately require.

Yet the problem
is a simple one. We are not building enough houses to meet the needs of our
growing population, be they immigrants, New Zealanders returning home, or
whatever. And the shortage of available houses is pushing up their price, first
and most dramatically in Auckland because that is where the biggest group of
our population lives, but more latterly in other parts of the country as well.
Nor is it restricted to buyers alone. Many people are discovering that as the
equity in their home increases, it is increasingly attractive for them to
leverage off that to acquire investment property, and the cost of servicing
mortgages on those properties is in turn affecting the level of rents being
charged. The consequent spiral seems upward and accelerating.

Some have
proposed a capital gains tax as the silver bullet to resolve this logjam, but,
in fact, such a measure would be likely to have precisely the opposite effect.
It would slow up the property market to the point of gridlock, because no-one
would be prepared to sell a property for fear of incurring the tax. No wonder
both the major parties have now ruled out the idea.

So the only
credible policy response is the simple but obvious one of building more houses.
That means central and local government working more closely together to ensure
more affordable and accessible land is freed up for development; it means more
collaboration with the building industry and the banking sector to ensure house
construction programmes are well-managed and that a boom-bust mentality does
not take hold, and that young families can be financed into them. Part of that
may include income related lending ratios overseen by the Reserve Bank. But the
bottom line is pretty clear – we cannot go on with the muddle in housing policy
we have now. The paradigms of the last 50 years have to change and rapidly. And
if that means a few shibboleths have to be overturned, so be it.

However, that
would remove the bones of sniping political contention and establish instead a focus
on achieving real solutions. Unfortunately, based on the past 50 years, neither
of the two main parties is likely to be that bold, or constructive.